The Government will publish an inland revenue order in the gazette on September 30 to enable Hong Kong to implement the Base Erosion & Profit Shifting package (BEPS) promulgated by the Organisation for Economic Co-operation & Development (OECD).
BEPS refers to tax avoidance strategies of multinational enterprises in exploiting the gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity.
Hong Kong indicated to the OECD in June 2016 its commitment to implementing the BEPS package. The relevant tax treaty-related measures include preventing the abuse of comprehensive avoidance of double taxation agreements/arrangements (CDTAs) and improving the dispute resolution mechanism provided for in CDTAs.
Developed by the OECD, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion & Profit Shifting aims to ensure swift, co-ordinated and consistent implementation of tax treaty-related BEPS measures in a multilateral context.
As of September 16, 99 jurisdictions, including Hong Kong, have joined the multilateral instrument.
During a public consultation exercise conducted towards the end of 2016, the Government received feedback that supported the use of the multilateral instrument for obviating the need to individually amend bilateral tax treaties and providing greater tax certainty.
China became a signatory to the multilateral instrument in 2017, and deposited the instrument of approval of the multilateral instrument with the OECD in May 2022.
Having sought the views of the Hong Kong Special Administrative Region Government, the Central People’s Government extended the application of the multilateral instrument to the city.
The multilateral instrument’s provisions will take effect in Hong Kong after completion of the domestic legislative procedures.
The Inland Revenue (Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion & Profit Shifting) Order will be tabled at the Legislative Council on October 19 for negative vetting.
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